Public Fiber Tough to Swallow

Across the United States, towns and cities dissatisfied with data services provided by the private sector are now delivering high-speed connectivity to the doorstep, often at lower prices.

In the process, however, municipalities are facing increasingly fierce opposition from cable operators and telecommunications companies unhappy with the competition. In some cases, cable companies and telcos are fighting to bar utilities entirely from providing broadband in the future.

During the past few years, public utilities across the United States began to expand their basic services from water, electricity and trash removal to include internet access, cable television and voice networks delivered over fiber optic networks. Municipalities say they are filling a void for a service essential to their community.

"It's like the spread of communities in the 1800s. Those that were along the railroad grew, while the others died out," he said.

In Truckee, a mountain community near Lake Tahoe in California, USA Media Systems, recently acquired by Cebridge Connections, has a monopoly on broadband internet and cable TV access, according to Harry. Cable modem users there have often complained about the service provided by the company and satellite dish services were not a viable alternative because large snowfalls frequently block reception, he said.

The Truckee utility researched the feasibility of creating a fiber optic network, and spent four years obtaining the permits, funding and partners needed to launch an integrated service that combines cable TV, voice over IP, security services and high-speed internet access. The utility formed a partnership with a private company, Eagle Broadband, to deliver the services.

Construction on the project was supposed to start in October, but in September, Cebridge Connections filed an objection with the local permit authority. As a result, the permit authority is now reconsidering whether the city can go ahead with its plan.

Harry said the fiber-optic network, which will cost $24 million, will provide faster internet access at 1.5 Mbps than DSL or cable modems (typically from 256 to 768 kilobits per second).

"We have a tremendous amount of people from Silicon Valley who want to work from their second home, and they demand fast access," he said.

Pete Abel, vice president of corporate communications at Cebridge Connections, said the company raised an objection about the Truckee fiber rollout because of concerns that its rates as an electricity customer would go up if the new service loses money. Abel said Cebridge reviewed the business plan and found it not to be financially viable.

"They are in effect outsourcing the cable services to a Texas company (Eagle Broadband) and passing it off to customers as their operation," Abel said. This arrangement amounts to unfair competition because Eagle Broadband receives "tax exempt public financing" that is not available to other cable and telecommunications providers, Abel said.